Vista Outdoor Rejects Colt CZ Business Combination Proposal

Camp Chef’s parent company, Vista Outdoor, has rejected an unsolicited proposal to merge with Colt CZ for $30 a share. Instead, they plan to continue forward with their plan to sell their Sporting Products business to Czechoslovak Group and keep their Outdoor Products division public.

Vista Outdoor’s board consulted with financial advisors and outside legal counsel and reached the determination that the merger proposal wouldn’t be more favorable to Vista stockholders.

• the purported value of $30 per Vista share in the November 22 Proposal significantly undervalues Vista;
• the November 22 Proposal does not provide adequate detail to determine whether the proposed transaction actually values Vista at $30 per share;
• the November 22 Proposal does not take into account the significant stockholder value that is expected to be created by the separation of the Outdoor Products and Sporting Products segments of Vista into two independent companies, each with its own dedicated strategic focus, enhanced ability to attract and retain top talent, tailored capital allocation philosophy, and set of competitive advantages;
• the November 22 Proposal does not provide adequate details relating to the debt and equity financing contemplated thereby and does not include any binding commitments with respect to such financing; and
• the November 22 Proposal does not provide adequate detail with respect to the proposed transaction, including, among other things, with respect to the proposed structure, transaction steps and contractual terms.

Gary McArthur, Interim CEO of Vista Outdoor

I’d agree with Vista’s letter, especially on the third bullet. The reason that Vista started with the separation is that they feel there’s a valuation discrepancy based on the trading multiple for the two divisions. A separation makes it easier for the market to properly value them, because they would be distinct companies. The Colt CZ offer is based on what Vista is currently trading at, which would be a low valuation based on the premise of their separation.

The offer from Colt CZ also noted that it was based on the relatively low operating margins currently for the Outdoor Products company. It’s been well established that there was pull-ahead and other headwinds for those companies, leading to a low margin environment. A merger with Colt CZ could undervalue the future upside in normal market conditions.